Baby Boomers' Biggest Financial Risk: Cognitive Decline

Cross posting from Personal Finance group

https://www.democraticunderground.com/11213122

For baby boomers who manage their own nest eggs, a risk is looming that has nothing to do with stock prices or interest rates. The risk is cognitive decline, which can rob them of their judgment, often without much warning. One big mistake—or a series of smaller ones—can go unnoticed by loved ones, and potentially ravage a lifetime of hard-earned savings. To mitigate these risks, there are things baby boomers and others can do now to prepare for any problems. In addition, big do-it-yourself investing and trading venues like Vanguard Group, Fidelity Investments and Charles Schwab Corp. are strengthening some of the ways they detect possible signs of decline. Among other things, all three firms check for clients’ difficulty navigating security protocols or need for frequent password resets. In such cases, a designated family member might be informed.

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Do-it-yourself boomers may be more vulnerable in some ways because they’re calling the shots solo, without help from wealth advisers. So if they go off the rails, no one else may know. “That’s the danger with do-it-yourself investors—they may be overconfident,” says Michael Finke, a professor of wealth management at the American College of Financial Services.

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For those investors, the risk might be veering away from some “set-it-and-forget-it” stock-and-bond allocation into, say, risky margin debt. Or it may be that they have a stack of unpaid bills that they lose track of and somebody has to intervene to sort things out. Or it may be just that their finances are a chaotic mess. Meredith Stoddard, Fidelity’s vice president of life events planning, says she knew of one investor who died holding “56 accounts at different firms.”

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Unfortunately, there’s no one-size-fits-all plan to deal with cognitive decline. People’s family situations and estate size and complexity vary. Some people may distrust their own children, complicating a power-of-attorney designation. Since February 2018, brokerage firms have been required to ask customers to designate a “trusted contact” who can be notified of possible problems. But a survey released last October indicated that less than 25% of firms’ clients have provided a name. Another rule adopted then gives firms greater power to step in and temporarily halt disbursements when fraud is suspected.

Baby boomers themselves also can take steps to prepare. One key element of a plan is identifying a person or service provider who can help manage one’s financial affairs, preferably under the kind of legal authority embodied in a power-of-attorney or trust. Another is collecting for that person—either in a binder or an internet vault—a list of goals and all the relevant financial account numbers and passwords, as well as regular monthly bills and important records.

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Allan Roth, a financial planner who is treasurer of the John C. Bogle Center for Financial Literacy, recommends that boomers try to simplify their finances before possible decline sets in. They can tell their advocates to shift assets into a low-cost robo-advisory service, or a single fund with a preset mix of stocks and bonds, if tax consequences allow. Mr. Bogle himself recommended shifting from 60% stocks to 50% later in retirement. Or they can suggest the advocate choose a financial planner or registered investment adviser for money-management help.

More..

https://www.wsj.com/articles/baby-boomers-biggest-financial-risk-cognitive-decline-11622942343 (subscription)

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Yes, reading this scared me..